Test bank for intermediate accounting principles and analysis 2nd

The major distinction between the Financial Accounting Standards Board FASB and its predecessor, the Accounting Principles Board APB, is 1.. The following published documents are part o

Test Bank for Intermediate Accounting Principles And Analysis 2nd

Multiple Choice Questions

The Financial Accounting Standards Board

1 a.has issued a series of pronouncements entitled Statements on Auditing Standards.

2 b.was the forerunner of the current Accounting Principles Board.

3 c.is the arm of the Securities and Exchange Commission responsible for setting financial accounting standards.

4 d.is appointed by the Financial Accounting Foundation.

Whether a business is successful and thrives is determined by

1 a.markets.

2 b.free enterprise.

3 c.competition.

4 d.all of these.

The role of the Securities and Exchange Commission in the formulation of accounting principles can be best described as

1 a.consistently primary.

2 b.consistently secondary.

3 c.sometimes primary and sometimes secondary.

4 d.non-existent.

The Financial Accounting Foundation

1 a.oversees the operations of the FASB.

2 b.oversees the operations of the AICPA.

3 c.provides information to interested parties on financial reporting issues.

4 d.works with the Financial Accounting Standards Advisory Council to provide informa-tion to interested parties on financial reporting issues.

The Governmental Accounting Standards Board's main purpose

is to develop standards for

1 a.the General Accounting Office.

2 b.the Federal government.

3 c.state and local government.

4 d.the Internal Revenue Service.

Financial accounting standard-setting in the United States

1 a.can be described as a social process which reflects political actions of various interested user groups as well as a product of research and logic.

2 b.is based solely on research and empirical findings.

3 c.is a legalistic process based on rules promulgated by governmental agencies.

4 d.is democratic in the sense that a majority of accountants must agree with a standard before it becomes enforceable.

The information provided by financial reporting pertains to

1 a.individual business enterprises, rather than to industries or an economy as a whole

or to members of society as consumers.

2 b.business industries, rather than to individual enterprises or an economy as a whole

or to members of society as consumers.

3 c.individual business enterprises, industries, and an economy as a whole, rather than

to members of society as consumers.

4 d.an economy as a whole and to members of society as consumers, rather than to individual enterprises or industries.

The major distinction between the Financial Accounting

Standards Board (FASB) and its predecessor, the Accounting Principles Board (APB), is

1 a.the FASB issues exposure drafts of proposed standards.

2 b.all members of the FASB are fully remunerated, serve full time, and are independent

of any companies or institutions.

3 c.all members of the FASB possess extensive experience in financial reporting.

4 d.a majority of the members of the FASB are CPAs drawn from public practice.

A common set of accounting standards and procedures are called

1 a.financial accounting standards.

2 b.generally accepted accounting principles.

3 c.objectives of financial reporting.

4 d.statements of financial accounting concepts.

In the House of GAAP, is the following on the highest level of authoritative status (meaning among the most authoritative)? FASB StatementFASB Statement; FASBof Financialof Financial; TechnicalAccountingFASBAccounting;

BulletinStandardsInterpretationConcepts

1 a.YesYesYesYes

2 b.YesYesYesNo

3 c.NoYesNoNo

4 d.NoYesYesNo

Accounting principles are "generally accepted" only when

1 a.an authoritative accounting rule-making body has established it in an official pro-nouncement.

2 b.it has been accepted as appropriate because of its universal application.

3 c.both a and b.

4 d.neither a nor b.

Which of the following statements is not an objective of

financial reporting?

1 a.Provide information that is useful in investment and credit decisions.

2 b.Provide information about enterprise resources, claims to those resources, and changes to them.

3 c.Provide information on the liquidation value of an enterprise.

4 d.Provide information that is useful in assessing cash flow prospects.

Financial statements in the early 2000s provide information related to

1 a.non-financial measurements.

2 b.forward-looking data.

3 c.hard assets (inventory and plant assets).

4 d.none of these.

Generally accepted accounting principles

1 a.include detailed practices and procedures as well as broad guidelines of general application.

2 b.are influenced by pronouncements of the SEC and IRS.

3 c.change over time as the nature of the business environment changes.

4 d.all of these.

Which of the following is not a publication of the FASB?

1 a.Statements of Financial Accounting Concepts

2 b.Accounting Research Bulletins

3 c.Interpretations

4 d.Technical Bulletins

Companies that are listed on a stock exchange are required to submit their financial statements to the

1 a.AICPA.

2 b.APB

3 c.FASB.

4 d.SEC.

Users of financial reports include all of the following except

1 a.creditors.

2 b.government agencies.

3 c.unions.

4 d.All of these are users.

An effective capital allocation process

1 a.promotes productivity.

2 b.encourages innovation.

3 c.provides an efficient market for buying and selling securities.

4 d.all of these.

An organization that has not published accounting standards is the

1 a.American Institute of Certified Public Accountants.

2 b.Securities and Exchange Commission.

3 c.Financial Accounting Standards Board.

4 d.All of these have published accounting standards.

One objective of financial reporting is to provide

1 a.information about the investors in the business entity.

2 b.information about the liquidation values of the resources held by the enterprise.

3 c.information that is useful in assessing cash flow prospects.

4 d.information that will attract new investors.

The body that has the power to prescribe the accounting

practices and standards to be employed by companies that fall under its jurisdiction is the

1 a.FASB.

2 b.AICPA.

3 c.SEC.

4 d.APB.

The purpose of the International Accounting Standards Board is

to

1 a.issue enforceable standards which regulate the financial accounting and reporting of multinational corporations.

2 b.develop a uniform currency in which the financial transactions of companies through-out the world would be measured.

3 c.promote uniform accounting standards among countries of the world.

4 d.arbitrate accounting disputes between auditors and international companies.

The following published documents are part of the "due

process" system used by the FASB in the evolution of a typical FASB Statement of Financial Accounting Standards:

1.Exposure Draft; 2.Statement of Financial Accounting

Standards; 3.Discussion Memorandum; The chronological order

in which these items are released is as follows:

1 a.1, 2, 3.

2 b.1, 3, 2.

3 c.2, 3, 1.

4 d.3, 1, 2.

FASB Technical Bulletins

1 a.are similar to FASB Interpretations in that they establish enforceable standards under the AICPA's Code of Professional Ethics.

2 b.are issued monthly by the FASB to deal with current topics.

3 c.are not expected to have a significant impact on financial reporting in general and provide guidance when it does not conflict with any broad fundamental accounting principle.

4 d.were recently discontinued by the FASB because they dealt with specialized topics having little impact on financial reporting in general.

The Financial Accounting Standards Board (FASB) was

proposed by the

1 a.American Institute of Certified Public Accountants.

2 b.Accounting Principles Board.

3 c.Study Group on the Objectives of Financial Statements.

4 d.Special Study Group on establishment of Accounting Principles (Wheat Committee).

Generally Accepted Accounting Principles include: 1) FASB Technical Bulletins, 2) APB Opinions, and 3) Widely-accepted industry practices These three items rank from most

authoritative to least authoritative as follows:

1 a.1, 2, 3.

2 b.1, 3, 2.

3 c.2, 1, 3.

4 d.2, 3, 1.

The purpose of Statements of Financial Accounting Concepts is

to

1 a.establish GAAP.

2 b.modify or extend the existing FASB Standards Statement.

3 c.form a conceptual framework for solving existing and emerging problems.

4 d.determine the need for FASB involvement in an emerging issue.

Accrual accounting is used because

1 a.cash flows are considered less important.

2 b.it provides a better indication of ability to generate cash flows than the cash basis.

3 c.it recognizes revenues when cash is received and expenses when cash is paid.

4 d none of the above.

The most authoritative category of generally accepted

accounting principles includes all of the following except

1 a.Accounting Research Bulletins.

2 b.APB Opinions.

3 c.FASB Standards.

4 d.FASB Technical Bulletins.

The Governmental Accounting Standards Board

1 a.oversees the activities of the SEC.

2 b.is a private-sector body, which addresses state and local governmental reporting issues.

3 c.is a division of the Securities and Exchange Commission, which oversees the corpo-rate accounting in annual reports.

4 d.was terminated when the Financial Accounting Standards Board was created.

General-purpose financial statements are the product of

1 a.financial accounting.

2 b.managerial accounting.

3 c.both financial and managerial accounting.

4 d.neither financial nor managerial accounting.

The Financial Accounting Standards Board employs a "due process" system which

1 a.is an efficient system for collecting dues from members.

2 b.enables interested parties to express their views on issues under consideration.

3 c.identifies the accounting issues that are the most important.

4 d.requires that all accountants must receive a copy of financial standards.

Which of the following is not a part of generally accepted

accounting principles?

1 a.FASB Interpretations

2 b.CAP Accounting Research Bulletins

3 c.APB Opinions

4 d.All of these are part of generally accepted accounting principles.

The process of identifying, measuring, analyzing, and

communicating financial information needed by management to plan, evaluate, and control an organization’s operations is

called

1 a.financial accounting.

2 b.managerial accounting.

3 c.tax accounting.

4 d.auditing.

The financial statements most frequently provided include all of the following except the

1 a.balance sheet.

2 b.income statement.

3 c.statement of cash flows.

4 d.statement of retained earnings.

Which of the following publications does not qualify as a

statement of generally accepted accounting principles?

1 a.Statements of financial standards issued by the FASB

2 b.Accounting interpretations issued by the FASB

3 c.APB Opinions

4 d.Accounting research studies issued by the AICPA

Which of the following organizations has not been instrumental

in the development of financial accounting standards in the United States?

1 a.AICPA

2 b.FASB

3 c.IASB

4 d.SEC

The purpose of the Emerging Issues Task Force is to

1 a.develop a conceptual framework as a frame of reference for the solution of future problems.

2 b.lobby the FASB on issues that affect a particular industry.

3 c.do research on issues that relate to long-term accounting problems.

4 d.issue statements which reflect a consensus on how to account for new and unusual financial transactions that need to be resolved quickly.

Members of the Financial Accounting Standards Board are

1 a.employed by the American Institute of Certified Public Accountants (AICPA).

2 b.part-time employees.

3 c.required to hold a CPA certificate.

4 d.independent of any other organization.

The most significant current source of generally accepted accounting principles is the

1 a.AICPA.

2 b.SEC.

3 c.APB.

4 d.FASB.

True - False Questions

The difference between generally accepted accounting

principles (GAAP) and specifically accepted accounting

principles concerns the degree of authority each possesses

1 True

2 False

Some generally accepted accounting principles have simply been accepted as appropriate because of their universal application rather than due to the action of an authoritative accounting rule-making body

1 True

2 False

Financial Accounting Concepts set forth fundamental

objectives and concepts that are used in developing future standards of financial accounting and reporting

1 True

2 False

The essential characteristics of accounting include

identification and measurement

1 True

2 False

An effective process of capital allocation promotes productivity and provides an efficient market for buying and selling

securities and obtaining and granting credit

1 True

2 False

Financial statements are the principal means through which financial information is communicated to those outside an

enterprise

1 True

2 False

The major purpose of the APB during its 13-year existence was

to develop a single set of accounting standards useful to all business entities

1 True

2 False

Users of financial accounting statements have both coinciding and conflicting needs for information of various types

1 True

2 False

The principal role of accounting is to furnish investors and

lenders information that is useful in assessing the prospective risks and returns associated with an investment

1 True

2 False

A major role of the Accounting Standards Executive Committee (AcSEC) is to inform the FASB of financial reporting problems that are developing in practice

1 True

2 False

Accounting is responsible for providing standards that ensure accurate financial information that cannot be manipulated or improperly reported

1 True

2 False

The SEC has been the principal organization in the development

of accounting standards

1 True

2 False

One weakness of accrual accounting is that it does not provide

a good indication of the enterprise's present and continuing ability to generate favorable cash flows

1 True

2 False

One of the objectives of financial reporting is to provide

information that is useful in assessing cash flow prospects of the entity being reported on

1 True

2 False

All those who serve on the FASB must be Certified Public Accountants

1 True

2 False

The passage of a new FASB Standards Statement requires the support of five of the seven board members

1 True

2 False

Users of the financial information provided by a company use that information to make capital allocation decisions

1 True

2 False

FASB Interpretations represent modifications or extensions of existing FASB Standards and have the same authority as

Standards

1 True

2 False

Accounting standards are now less likely to require the

recording or disclosure of fair value information due to its inherent subjectivity

1 True

2 False

Ethical issues in financial accounting are governed by the

AICPA

1 True

2 False

Currently, both U.S GAAP and the International Financial

Reporting Standards are acceptable for international use

1 True

2 False

FASB Technical Bulletins are more authoritative than FASB Standards and Interpretations

1 True

2 False

The AICPA’s Code of Professional Conduct requires that

members prepare financial statements in accordance with

generally accepted accounting principles

1 True

2 False

Financial reports in the early 21st century did not provide any information about a company’s soft assets

1 True

2 False

Accounting standards are a product of careful logic or empirical findings and are not influenced by political action

1 True